Understanding “Bank-Owned,” “Foreclosure” and “Short Sale” Purchases Of Ocean Pines And Greater Ocean City Maryland Area Properties
Purchasing Foreclosure Property
A Foreclosure Property could be any parcel of land, lot, condominium unit or other real property subject to a pending foreclosure proceeding. A foreclosure proceeding is the legal process initiated by a bank or other creditor to repossess the collateral for a loan that is in default.
In Maryland, the General Assembly passed a number of bills during the 2010 legislative session that significantly impacts how Maryland foreclosures are conducted. For this and many, many other reasons, buying at a foreclosure auction can be a very risky and complicated way to purchase real property and should not be undertaken without expert assistance.
Some examples of complications arising out of a purchase from foreclosure sale include the purchasers inability to inspect the property and the often encountered requirement that a purchaser pay the entire purchase price in cash in a relatively short period of time. Sometimes there are title issues related to legal defects in how the foreclosure sale was conducted. There is also the potential of an owner’s unwillingness to vacate the property. The list goes on and on. Don’t even think about trying this by yourself.
Purchasing Bank-Owned Property
A Bank-Owned property, which is also called a REO ( meaning “Real Estate Owed” property owned by a bank), is typically property that has gone back to the bank after a foreclosure sale was conducted where no third party bidders bought the property at the auction. In today’s marketplace, most if not nearly all foreclosure auctions do not even result in bids from third parties, and become Bank-Owned properties.
Sometimes a Bank Owned property is one acquired by the bank in a “Deed-In-Lieu-Of-Foreclosure” transaction where the bank acquires title from a borrower whom is in default to avoid foreclosure proceedings.
Purchasers of Bank-Owned properties generally face a less risky proposition than those that purchase property at a foreclosure auction. For example, often the bank will make necessary repairs prior to marketing the property, and the buyer will typically have much opportunity to investigate the property and conduct needed inspections.
Purchasing Short Sale Property
A Short-Sale property is one where a “short-sale payoff” is negotiated with a bank holding a lien against the title and the bank agrees to accept less than the outstanding total amount due. A short sale allows both the bank and the distressed property owner to avoid foreclosure by selling the property at a loss.
Short sales are more complicated and time consuming than an average real estate sale thru the MLS. For starters, the seller must find a qualified purchaser for their property at the current market value, then have the proposed sale transaction package submitted to the seller’s lender for approval. The sale transaction package will most likely consist of, among other things, a proposed preliminary HUD-1 settlement statement, comparative market analysis or list of recent comparable sales, and a full financial package from the seller.
After submission, buyers sometimes may wait a very long time to get a response from the bank. If a purchaser is not inclined towards patience, a short sale may not be the best way to proceed.
We at HomeBuyerPower® stand ready to assist and guide our clients thru any of these often complex, sophisticated transactions. HomeBuyerPower® was founded by Joseph A. Warth, a licensed real estate broker and real estate attorney with over 2 decades of experience serving home and condominium buyers in the Ocean Pines and greater Ocean City area. We offer affordable rates and a friendly atmosphere where clients are welcome to call or visit our office with questions.
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